References in this Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2022 (the "Report") to "we," "us" or the "Company" refer to Malacca
Straits Acquisition Company Limited. References to our "management" or our
"management team" refer to our officers and directors. The following discussion
and analysis of our financial condition and results of operations should be read
in conjunction with the accompanying unaudited condensed financial statements
and the notes thereto contained elsewhere in this Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Report includes "forward-looking statements" that are not historical facts,
and involve risks and uncertainties that could cause actual results to differ
materially from those expected and projected. All statements, other than
statements of historical fact included in this Report including, without
limitation, statements in this "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the our financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. When used in this Report,
words such as "expect," "believe," "anticipate," "intend," "estimate," "seek"
and variations and similar words and expressions, as they relate to us or our
management, are intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future performance, but
reflect management's current beliefs, based on information currently available.
Except as expressly required by applicable securities law, we disclaim any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on July 17, 2019 as a Cayman Islands
exempted company for the purpose of effecting a Business Combination with one or
more businesses or entities. We intend to effectuate our initial Business
Combination using cash from the proceeds of the Initial Public Offering and the
sale of the Private Placement Warrants, our shares, debt or a combination of
cash, equity and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception to June 30, 2022 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below under "Liquidity and Capital Resources", and, after the Initial
Public Offering, identifying a target company for a Business Combination. We do
not expect to generate any operating revenues until after the completion of our
Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account, a trust account
located in the United States with Continental Stock Transfer & Trust Company
("Continental") acting as trustee. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses in connection with completing
a Business Combination.
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For the three months ended June 30, 2022, we had net income of $993,484, which
consisted of operating expenses of $233,003, offset by change in fair value of
derivative warrants liabilities of $1,154,156 and dividend earned on investments
held in the Trust Accounts of $72,331.
For the three months ended June 30, 2021, we had a net loss of $3,146,583, which
consisted of operating expenses of $329,817, offset by change in fair value of
derivative warrants liabilities of $2,821,308 and interest and dividend earned
on investment held in the Trust Accounts of $4,542.
For the six months ended June 30, 2022, we had a net income of $3,903,958, which
consisted of operating expenses of $422,345, offset by the change in fair value
of derivative warrant liabilities of $4,249,843 and interest and dividends
earned on investments held in the Trust Account of $76,460.
For the six months ended June 30, 2021, we had a net income of $287,280, which
consisted of operating expenses of $620,974, offset by the change in fair value
of derivative warrant liabilities of $886,572 and interest and dividends earned
on investments held in the Trust Account of $21,682.
Liquidity and Capital Resources
On July 17, 2020, we consummated the Initial Public Offering of 12,500,000
Units, and on July 21, 2020, we consummated the sale of an additional 1,875,000
Units which included the full exercise by the underwriters of their
over-allotment option, at $10.00 per Unit, generating aggregate gross proceeds
of $143,750,000. Each Unit consists of one Class A ordinary share, par value
$0.0001 per share, and one-half of one redeemable warrant, with each whole
warrant entitling the holder thereof to purchase one share of Class A ordinary
share for $11.50 per share. Simultaneously with the closing of the Initial
Public Offering and the full exercise of the over-allotment option, we
consummated the sale of an aggregate of 4,375,000 Private Placement Warrants to
our Sponsor at a price of $1.00 per warrant, generating aggregate gross proceeds
of $4,375,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $143,750,000 was
placed in the Trust Account. We incurred $8,394,954 in transaction costs,
including $2,875,000 of underwriting fees, $5,031,250 of deferred underwriting
fees and $488,704 of other offering costs in connection with the Initial Public
Offering and the sale of the Private Placement Warrants. Of these amounts,
transactions costs of $186,456 attributable to the issuance of the warrants were
expensed during 2020.
For the six months ended June 30, 2022, net cash used in operating activities
was $203,205. Net income of $3,903,958 was offset by the change in the fair
value of derivative warrant liabilities of ($4,249,843) and interest earned on
investments held in the Trust Account of $4,129. Changes in operating assets and
liabilities used $146,809 of cash from operating activities.
At June 30, 2022, we had cash and investments held in the Trust Account of
$48,152,886. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account
(less taxes payable (if applicable) and deferred underwriting commissions) to
complete our Business Combination. To the extent that our shares or debt is
used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the post-Business Combination
entity, make other acquisitions and pursue our growth strategies.
At June 30, 2022, we had cash of $129,819 held outside of the Trust Account. We
intend to use the funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, properties or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
On December 27, 2021, we held our 2021 annual general meeting of shareholders
and approved, among other things, the Extension Amendment, which extended the
date by which we must consummate a Business Combination from January 17, 2022
(which is 18 months from the closing of our Initial Public Offering) to October
17, 2022 (or such earlier date as determined by the Board) by amending our
Amended and Restated Memorandum and Articles of Association and other related
proposals. The Extension Redemption, in which shareholders holding 9,669,449
Public Shares exercised their right to redeem such Public Shares for a pro rata
portion of the Trust Account, also occurred in connection with the Extension
Amendment. We paid from the Trust Account an aggregate amount of $96,761,060, or
approximately $10.00 per share to redeeming shareholders in the Extension
Redemption. For each one-month extension, the Sponsor agreed to the
Contribution, whereby the Sponsor contributes to us, as a loan, $0.03 for each
Public Share not redeemed in connection with the Extension Amendment.
Contributions in the amount of $141,167 are payable monthly through our
extension date in October 2022 (if the Sponsor fully extends the term we have to
complete an initial Business Combination).
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we
would repay such loaned amounts. In the event that a Business Combination does
not close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts, but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into warrants identical to the Private Placement Warrants, at a
price of $1.00 per warrant, at the option of the lender.
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If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating and consummating a Business Combination
are less than the actual amount necessary to do so, we may have insufficient
funds available to operate our business prior to our Business Combination.
Moreover, we may need to obtain additional financing either to complete our
Business Combination or because we become obligated to redeem a significant
number of our public shares upon consummation of our Business Combination, in
which case we may issue additional securities or incur debt in connection with
such Business Combination. Subject to compliance with applicable securities
laws, we would only complete such financing simultaneously with the completion
of our Business Combination. If we are unable to complete our Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our Business Combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations. We have entered
into the Promissory Notes with our Sponsor for additional funding (see Note 4 in
"Item 1. Financial Statements"). The Promissory Notes are non-interest bearing
and payable at the earlier of (i) the date on which the initial Business
Combination is completed and (ii) the date of our liquidation. Such proceeds
were used to fund working capital. As of June 30, 2022, there was a total of
$1,880,833 outstanding under the Promissory Notes.
Going Concern
In connection with the our assessment of going concern considerations in
accordance with ASU 2014-15, we have determined that if we are unable to
complete a Business Combination in the Combination Period, which is from January
17, 2022 (which was 18 months from the closing of the Initial Public Offering)
to October 17, 2022 (if the Sponsor fully extends the term we have to complete a
Business Combination), then we will cease all operations except for the purpose
of liquidating. The date for mandatory liquidation and subsequent dissolution
raises substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after the Combination Period. We intend to
complete a Business Combination before the mandatory liquidation date.
Off-Balance Sheet Financing Arrangements
We had no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements, as of June 30, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
The underwriters are entitled to a deferred fee of $0.35 per unit, or $5,031,250
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement. A
portion of such amount, not to exceed 25% of the total amount of the deferred
fee held in the Trust Account, may be re-allocated or paid to unaffiliated
thirds parties that assist us in consummating a Business Combination. The
election to re-allocate or make any such payments to unaffiliated third parties
will be solely at the discretion our management team, and such unaffiliated
third parties will be selected by the management team in their sole and absolute
discretion.
Pursuant to a registration rights agreement entered into on July 14, 2020, the
holders of the Founder Shares, Private Placement Warrants and any warrants that
may be issued upon conversion of the Working Capital Loans (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares) are entitled to registration rights requiring us to
register such securities for resale (in the case of the Founder Shares, only
after conversion to the Class A ordinary shares). The holders of these
securities are entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of a Business Combination and rights to require us
to register for resale such securities pursuant to Rule 415 under the Securities
Act. The registration rights agreement does not contain liquidated damages or
other cash settlement provisions resulting from delays in registering our
securities. We will bear the expenses incurred in connection with the filing of
any such registration statements.
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Critical Accounting Policies
The preparation of the accompanying unaudited condensed financial statements and
related disclosures in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified
the following critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
We issued 7,187,500 Public Warrants to investors in our Initial Public Offering
and issued 4,375,000 Private Placement Warrants. All of our outstanding warrants
are recognized as derivative liabilities in accordance with FASB ASC Topic
815-40, "Contracts in Entity's Own Equity". Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjust the instruments to
fair value at each reporting period. The liabilities are subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statement of operations. The fair value of the
Public Warrants was initially measured using a Monte Carlo simulation approach
with subsequent measurements based off the quarterly trading price, whereas the
fair value of the Private Placement Warrants was estimated initially and
subsequently using a Modified Black Scholes Model.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC 480. Ordinary shares subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that
features redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption is presented as temporary equity, outside of the
shareholders' deficit section of our unaudited condensed balance sheets in "Item
1. Financial Statements".
Class A ordinary shares subject to possible redemption is presented at
redemption value as temporary equity, outside of the shareholders' equity
section of our balance sheet. Under FASB ASC Topic 480-10-S99, "Distinguishing
Liabilities From Equity", we have elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying value of the security to
equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for the security.
Net Income (Loss) per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted average number of shares of ordinary shares outstanding for the
period. Income or loss is allocated on a pro rata basis to each of the two
classes of ordinary shares. Accretion associated with the redeemable shares of
Class A ordinary shares is excluded from income (loss) per ordinary share as the
redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that there are any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our accompanying unaudited condensed financial statements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the COVID-
19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial Business Combination.
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